GLOBAL ECONOMIC POWER & GEOPOLITICS Unresolved geopolitical tensions could have major implications for global trade, and the energy and shipping markets. US-China tension, triggered by disagreements over trade, human rights violation and territorial claims over the South China Sea, did not diminish in 2021 despite the election of a new US president. In the energy industry, Russia is facing opposition in obtaining consent for the newly-completed Nord Stream 2 pipeline to begin operation, on the grounds that it would increase Europe’s energy dependence on Russia. Recent escalation of the geopolitical tensions between Russia and Ukraine has caused economic disruptions in the region. The fallouts could affect the global economic recovery as well as the energy market. Material Matters Governance and integrity Outlook and Opportunities Global economic power will shift away from the established advanced economies of the last century, as emerging market countries gain more dominance in their share of the world GDP. This longer-term trend is expected to play out despite recent mixed performance in some emerging economy countries. China’s economic policies will feature more in the shaping of global trade flows which will impact a spectrum of industries, including energy and shipping. As it seeks to further grow its economy, China will look to secure a greater share of the world’s natural resources to drive its ambition. Geopolitically, the current world order is breaking down and reforming into a new paradigm. A scenario analysis suggests that US and China influence and leadership, as well as bilateral relations between these two countries, will have a major impact in defining the international landscape. The analysis found that the most likely outcome for the decade ahead would be a multipolar order, unlike the unipolar or bipolar Cold War-style order of previous years. In the medium to long term, the shipping industry may have to contend with greater political interference in trade, as well as increasing nationalism and de-globalisation, which may cause the shortening or rationalising of shipping routes. Our response • The continuing rise of China and other fast-growing countries will drive demand for shipping and energy and create opportunities which can benefit MISC in the long term. • In exploiting these opportunities however, MISC will need to tread carefully to manage risks such as trade or geopolitical disputes. Risks OUR OPERATING ENVIRONMENT STRATEGIC REVIEW Geopolitical instability ADVANCEMENT IN TECHNOLOGY AND DIGITALISATION IN THE MARITIME SECTOR The accelerated adoption of technology in the maritime sector, with commercial and environmental needs as key enablers, is driving the future evolution of the sector. The integration of advanced technologies such as blockchain applications, cargo and vessel tracking, autonomous ships and artificial intelligence into the shipping sector will enable industry players to better cater to customer needs and demands. Alongside this, R&D focusing on new fuels and propulsion systems, as well as technology for reducing emissions are beginning to take centre stage. Similarly, the energy sector is also undergoing a rapid pace of digitalisation, as reflected in increasingly more investments made in digital technologies over the last few years. Oil and gas companies are seeking out synergistic non-traditional partnerships with companies in the fields of technology, transportation and commerce, as they focus on developing costeffective solutions across their value chain. Material Matters Outlook and Opportunities Investments in the emerging technology space is expected to increase further, especially those which provide access to green energy sources and alternative fuel options. In the coming years, technological and digital transformation will accelerate along with cross-sectoral collaborations and technologybased partnerships. Digitalisation will play a major role in enabling the maritime transport sector to cater to increased demand by enhancing safety and efficiency, while green technology will bring about cost effective and environmentally sustainable operations. Our response • MISC is involved in the Castor Initiative to develop a commerciallyviable ammonia-fuelled zero-carbon emissions vessel. • MISC through AET has made a strategic investment, together with other investors, in a climate tech start-up called Daphne Technology in developing solutions to convert toxic and GHG pollutants such as nitrogen oxides, methane and carbon into non-hazardous by-products, which are either released into the environment or transformed into valuable products. The venture is currently pursuing commercial deployment and scale-up and is positioning its solutions in landmark projects. • MISC has invested in three digital ventures that seek to transform the shipping industry by improving maritime safety and introducing digitalised decarbonisation and inventory management systems. These industry disruptors will be key drivers for the smart ship, which will leverage automation and assistive technologies to ensure safety, efficiency and environmental sustainability. • Another aspect of MISC’s digital strategy is to become a data-driven organisation. We are embedding digital ways of doing things into our corporate DNA, by transforming our finance, procurement and document control systems, to have data and information at our fingertips, and at the speed of light. Risks Technology developments Cybersecurity MISC Berhad 76 Integrated Annual Report 2021 MISC Berhad Integrated Annual Report 2021 77
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